Staying Afloat Through the Health Insurance Cost Perfect Storm

As health insurance premiums continue to climb, individuals and small business owners alike are seeking ways to cope. Meanwhile, health insurance companies face increased challenges in the form of federal and state mandates, rules and regulations, trial attorneys, compensation issues with their provider networks, market share positioning, and others, all leading to increasd costs of doing business, which translates into ever escalating premiums. Physicians, hospitals and other health care providers are being pressured by constant demands for lower reimbursements, which fosters a feeling of resentment toward the health insurance carriers.

All will agree that everybody in this mix is unhappy with everybody else. Will the person with the answers to these problems please stand up?

For now, it is what it is. We did not get into this predicament over-night, and digging ourselves out will take time. Government provided , nee "Single Payor" health insurance, has been advocated by some in Washington. However, one needs only to look at Medicare, Medicaid and Social Security and the dire predictions attached to them for a preview of the consequences of universal government managed health care. When pressed, common sense Americans reject the idea of government rationed and controlled health care, because they understand that "free" health care is far from being free.

In pre-World War II America, health insurance occupied a relatively small niche in the economy. Most doctors and other health care providers charged fees they deemed reasonable, given the patient's treatment needs...and often, that person's perceived ablilty to pay. Relatively few patients were covered by employer sponsored health insurance and even fewer owned personal health insurance policies.

Then as we answered the attack on Pearl Harbor, wage and price freezes were imposed upon us, leaving employers only limited options to adjust employee compensation. One option was to provide employer-paid health insurance for employees. From that point forward, employees began transferring their health care expense issues to their employers, eventually losing track of what actual health care costs were. In the early 1970's, Health Maintenance Organizations (HMO's) arrived on the sceen, further screening its members from knowledge about the actual cost of health care procedures and prescription drugs.

During the post WW II years, the practice of medicine catapulted into the space age. Surgical procedures that once required hospitalizations of a week or more, are now routinely performed as out-patient procedures, allowing the patient to return home a few hours afterward undergoing such. Miracle medicines have been discovered, offering cures for once-fatal diseases. The downside, if there is one, is that these medical miracles came with a very high price tag.

So here we are, in the midst of a health care perfect storm. Medical care has become a very expensive proposition. Health Insurance companies are caught between federal and state regulations mandating the inclusion of certain benefits in their insurance offerings, while striving to offer affordable plans that must generate enough revenue to pay claims and administrative expenses, while providing enough profit to satisfy their stockholders. Even the so-called non-profit insurance companies must generate enough dollars to cover expenses, plus some contingeny dollars, or be forced out of business. Buyers of health insurance, both individuals and businesses, are on the receiving end of the blast from this storm, some opting to roll the dice and discontinue their insurance.

To hold the line on year to year premium creep (or premium vault), health insurers have changed their benefit packages to engineer savings which translate into lower premiums. We are now seeing blended health insurance plans with some services being provided in exchange for a lump sum "co-payment", while others require the satisfaction of an annual deductible amount plus a sharing of the claim expense between the insured person and the insurance company,[co-insurance]. More often now the Prescription Drug benefit portion of these plans require that a separate deductible be met before covering non-generic medications. Many health plans now contain per-insured-person lifetime maximum benefit payouts, such as $3,000,000 or $5,000,000, at which point the policy is exhausted.

How can individuals and business owners reduce their premium bills, while avoiding the potential "medical bankruptcy" that a prolonged illness may cause? Former PGA Tour golfer and comentator, Dave Marr, often observed that a golfer finding himself in trouble must first, "take his medicine before he can get well". So step up to the counter, to consider some of these medications:

     1. The original idea behind major medical health insurance is that it is to pay the BIG bills, to provide a firewall between you and financial ruin. So take a hard look at your finances to find a dollar amount you are able to pay to cover your day to day medical expenses each year. If you can handle $13.70 per day, that equals around $5,000 in a year. The difference in monthly premiums between a health insurance policy with a $1,000 annual deductible and the same with a $5,000 annual deductible is around 50%.
Increase your deductible and save premium dollars.

     2. If you are covered by an HMO, look for an alternative plan providing increased co-payment amounts...meaning you pay more at time of service. That move will reduce your premium outlay. Why pay mega-bucks for an HMO offering $10 co-pays for visits to your doc, who you may see maybe twice per year, when you can increase your co-pay to $30, and realize a substantial premium savings.

     3. If you have access to a Health Savings Account Plan, by all means take advantage of that option...saves premiums and allows you to pay medical bills with income-tax-free dollars.

     4. If you, as a business owner, provide group health insurance to your employees, consider changing to a plan offering services in exchange for deductibles and co-insurance. Put your employees back into the game by helping them rediscover the real costs of medical treatment as they see them illustrated on the Explanation of Benefits Forms provided to them as they file claims. They will not like it, but making that change will help hold down your, and their, premium costs.

     5. Another option for business owners, is a Health Reimbursement Account group plan. In shorthand, the business agrees to pay front-end medical expenses for each employee up to a certain amount, at which point, the group health insurance plan takes over. Premiums for those plans are relatively lower, while the sponsoring employer is placed in a much better position to budget his/her health benefits expenses.

The common thread here is take on more of the risk personally in order to reduce premiums. Abandon the mind-set that continually seeks to have someone else pay your medical bills for you. As you rely on your computer's firewall to avoid a data melt-down, also rely on your health insurance plan's deductible to shield your pocketbook. Pay for the "small stuff" out of pocket, via deductibles and co-insurance, then rely on your insurance to handle the big bills.

Finally, recent legislation in Florida has established two new health insurance related programs: Cover Florida and Florida Health Choices. Neither program was up and running as of mid-July, 2008; however, state and federal intrusion into the private economic sector has a poor record of success. Case in point: Florida's 1993 small group health insurance legislation mandating guaranteed issue to employee groups of fifty or less . That mandate took away the ability of the free market to work, tying the "invisible hand"(see economist Adam Smith) to a tree in Tallahassee. Many established small group health insurers simply withdrew from the state or exited the health insurance business, limiting the employer's choices and watering down competition, among a mountain of other negative results. While zealously chasing votes, too many politicians forget that the Law of Unintended Consequences is always in play.